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Jul 9, 20234 min read

Can the BSGI continue without Russia?

For a long time now I, and those I work with have believed that Snake Island and Türkiye are the key to making the Black Sea Grain Initiative (BSGI) work and today seems like a good time to discuss why that is and its implications for what may come next for Ukrainian grain exports via the Black Sea, even if the BSGI deal collapses.


On 24Feb22 Snake Island was attacked by two Russian war ships (the Vasily Bykov and the Moskva) who eventually landed troops and captured the island despite heroic resistance. @CovertShores has been maintaining a list of events. ​​http://www.hisutton.com/Timeline-2022-Ukraine-Invasion-At-Sea.html



This capture was intended to pave the way for Russia to place air defense and other assets on the island to cement their control over the Western Black Sea and specifically the shipping corridor to Odesa.


Snake Island is only 35 kms from the Ukrainian coast and what followed was a series of strategic Ukrainian attacks on the island and resupply efforts by Russia, culminating in a withdrawal of Russian forces on 30Jun22.


In that same February to June period Ukraine struck the Vasily Bykov on 07Mar and the Moskva on 13Apr, only the Moskva sunk. These actions, as well as the sinking of the Saratov on 24Mar and the Vasily Bekov on 17Jun, were the beginning of the Ukrainian Navy regaining control of portions of the Black Sea.


This paved the way for the Black Sea Grain Initiative as now Russia no longer had absolute control of the shipping corridor.


The BSGI worked pretty well, even after Russia attacked the port of Odesa the day after signing. On 29Oct Ukraine used USV’s to attack Sevastopol…


…and Russia in turn pulled out of the BSGI.


While Russia was out of the deal, Putin specifically told Erdogan that Turkish ships would be safe.


More than one analyst at the time interpreted this as weakness on Russia’s part.


Fast forward to Zelensky making a trip to Snake Island to pay his respects.


The weather around that period could have impacted travel and between mines, the Russian Navy and the Russian Air Force that trip was beyond ballsy.


What are the take-aways from Zelensky’s visit?

  • Russia does not have control in the Western Black Sea.

  • Russia may not have been aware of these movements,

  • they were unable to respond in time,

  • they were not confident in their ability to strike

  • or Ukraine sends small boats often enough that it wasn’t out of the ordinary.


On the 500th day of war Türkiye allowed the defenders of Azovstal to return home. The original agreement for their release from Russian captivity reportedly required them to stay in Türkiye for the extent of the war.


Predictably, Russia was really unhappy about the return and they appear not to have been consulted.


During the meetings in Türkiye a number of other agreements were signed including the joint production of UAVs and a strategic industries MOU.

Notably Erdogan also publicly stated that Ukraine should be a member of NATO.


Many have suggested Erdogan has changed sides, I don’t think that’s a reasonable interpretation. Erdogan will always play for Erdogan and if he wants to continue stalling Sweden’s ascension to appease the homefront, this is an alternate step to appeasing the West while growing his economy.


What does it all mean for the BSGI? Russia has been slow-rolling the BSGI for months and I think they have overplayed their hand. It has been 11 days since a new ship has been inspected and that means the month of July will be a write off. They have made the agreement obsolete.


There is no reason for the West to work with Russia to resolve their list of requirements for renewal because the Initiative literally isn’t doing anything. It’s a moot point.


Moreover, everytime the West tries to resolve one of the issues, Russia says “not good enough”. When Ukraine agreed to the @UN’s deal to transit ammonia through the pipeline, Russia blew it up.


When the EU suggested a subsidiary of the Russian Agricultural Bank could be let into SWIFT, Russia said no.


Ukraine has been preparing for this for a long time, starting with their War Risk Insurance legislation.


If I were Ukraine I would continue with inspections of ships and possibly even publicizing cargo data as the BSGI does currently. They have nothing to hide and demonstrating to the world that your economy is viable and open for business is important.


I expect that if Russia pulls out of the BSGI there will be a continuation of some sort but it hinges on Türkiye’s cooperation which is why this meeting was pivotal. It’s not without peril. Even if you can keep the ships safe while at sea there is a risk to the ports of Odesa themselves.


If Russia is not a party to the BSGI any longer there is nothing stopping them from targeting the port facilities other than air defense and we don’t know that Ukraine has enough to mitigate that risk.


There are 8 days left in the Black Sea Grain Initiative and Ukraine has a plan. They have been working hard to demonstrate it is possible. All they need now are some allies who benefit greatly from the deal to put some skin in the game. Erdogan seems poised to do so.


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Mar 17, 20232 min read

What does Putin get?

To a person, the brilliant folks I have been talking to about a Black Sea Grain Initiative (BSGI) renewal have all asked me “What does Putin get out of the deal?” They aren’t wrong that it is an important factor, so let’s explore.


Hands down, the most important thing he gets is control without the use of force. By agreeing to the Black Sea Grain Initiative we (via UN approval) have collectively said, “We’ll let you keep blockading a country’s ports but they are important to the rest of the world so please can we still use them?” In fact, the name alone is troubling. It implies that it includes all grain shipments through the Black Sea but, as my recent posts have noted, it does not.


We made an agreement with an aggressor state which allows them to inspect ships transiting in and out of a country they invaded and which simultaneously restricts the invaded country’s exports to very select commodities. Specifically, these are very important commodities that the rest of the world relies on to ease starvation and food security issues. Moreover, Russia gains further control because there is no recourse to the significant shipping delays their inspectors are causing.


This sets Russia up in the best possible light. They are cooperating with the international community to fight world hunger in Global South countries and they open exports for their friends, like China, who import the largest portion of the grain from Ukraine. All this while ensuring that exports are limited in type, quantity and value, which restricts the health of the economy of Ukraine.


Russia’s efforts are so effective that wheat tenders for the grains purchased from Russian ports, which almost certainly include grain stolen from occupied territories, are quoted at a higher price than grain from Ukrainian ports. Not only are they controlling the Ukrainian economy but they are helping their economic competitiveness at the same time.


Possibly even more notable is the dissent they are causing in EU countries. In order to diversify export alternatives, Ukraine and the EU have worked together on Solidarity Lanes, expedited rail and road transport of exportable goods from Ukraine to EU ports. The unfortunate part is that, by increasing export of Ukrainian goods (that would normally have gone out by sea) into EU countries, it is dropping the prices EU producers can get for their goods. This breeds frustration and instability in EU countries that are contributing to the Ukrainian war effort and it has the potential to eventually cause elections strife for governing parties. The long term impacts of Russia blocking Ukrainian ports and exports are a national security risk for EU countries.


And fundamentally that’s what Putin gets, significant influence over the Ukrainian economy and partial influence over EU markets, all without having to attack a single ship or otherwise use force in the Black Sea. We didn’t even fight him over it.

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Feb 26, 20232 min read

Why does War Risk Insurance matter?


On 24Feb Oleksandr Kubrakov announced that the Ukrainian Verkhovna Rada had amended the 2023 State Budget of Ukraine to include up to 20 Billion UAH for the funding of a war risk insurance program which will cover both inland and sea borne vessels.


This wasn’t the first time they talked about this plan. If you watched their coverage from @WEF in Davos in January, then you will have seen them talk about it and I noted then how important it could be. At the time they did not mention the insurance being applied to shipping vessels.


So why is this important? You may remember that on 29Oct2022 there was an attack on the port of Sevastopol, reportedly by Ukrainian USVs. In response to this, Russia decided to suspend their involvement in the Black Sea Grain Initiative (BSGI).

Subsequently, on 31Oct2022 Russia suspended the movement of ships along the grain corridor which caused one of the main insurers to suspend coverage for all new shipments. This effectively shut down the BSGI.


The revocation of insurance was really the only thing that shut down the BSGI during this incident. The UN, Türkiye and Ukraine were all committed to continuing the initiative despite Russia pulling out.


By introducing this war risk insurance the Ukrainian government is removing the major stumbling block that stopped movement of vessels. As we approach the renewal date for the BSGI (19Mar2023), Ukraine is essentially calling Putin’s bluff. If he doesn’t agree to an extension, then the UN, Tükiye and Ukraine have demonstrated that they will continue the initiative regardless. Russia may have to interfere with the ships in the humanitarian corridor in order to take back control and the response would be world-wide condemnation. Ironically, China’s “Peace Plan”, released this week, specifically mentions how important the BSGI is and encourages support for the work of the UN.


“9. Facilitating grain exports. All parties need to implement the Black Sea Grain Initiative signed by Russia, Türkiye, Ukraine and the UN fully and effectively in a balanced manner, and support the UN in playing an important role in this regard. The cooperation initiative on global food security proposed by China provides a feasible solution to the global food crisis.”


Again, this is your friendly reminder that China imports the highest percentage of BSGI products. Their percentage has been increasing regularly. The BSGI is a strategically advantageous deal for China as it continues to increase its strategic stockpiles of grain.


In the bigger picture, this war risk insurance has the potential to open exports (or imports for that matter) for other Ukrainian products. Before the full scale invasion and shutdown of Ukrainian Black Sea ports by Russia, Ukraine’s largest trading partner was the EU and iron and steel were the main exports. The new insurance package potentially covers any ship wishing to export any goods from Ukraine. Exports mean an injection of cash into the Ukrainian economy, which is an important step towards restoration, but more importantly, it reinforces Ukrainian sovereignty and autonomy.

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